LD24-059

Landlord application · rent increase. Outcome: granted. A. The maximum allowable rent for the Rental Units are as follows: Unit # New Rent (6%) Effective Date 1 $1,052.40 March 1, 2024 2 $1,052.40 March 1, 2024 3 $1,052.40 March 1, 2024 4 $920.72 March 1, 2024 5 $920.72 March 1, 2024 6 $920.72 March 1, 2024

Order text

Orders of the Director of Residential Tenancy
Docket 23-917 February 23, 2024
Introduction
[1] On November 20, 2023 the Landlord filed (6) six Landlord Applications to Request Additional Rent Increase (Form 9s) (the “Applications”) with the Residential Tenancy Office (the “Rental Office”), pursuant to clause 50(1) of the Residential Tenancy Act (the “Act”).
[2] The Applications seek a rent increase above the annual allowable guidelines established by the Director of Residential Tenancy (the “Director”), pursuant to clause 49(2) of the Act. The Applications disclose the current rents, proposed rents and the effective dates as listed below.
Unit # Current Rent Proposed Rent Effective Date 1 $992.83 $1,052.40 March 1, 2024 2 $992.83 $1,052.40 March 1, 2024 3 $992.83 $1,052.40 March 1, 2024 4 $868.60 $920.72 March 1, 2024 5 $868.60 $920.72 March 1, 2024 6 $868.60 $920.72 March 1, 2024
[3] On January 8, 2024 the Landlord submitted into evidence the Landlord Statement of Income and Expenses (Form 10) (the “Statement”).
[4] All documents (including the Tenant Notice of Annual Allowable Rent Increases (Form 8), the
Notice of Hearing and Evidence Package) were properly served to the parties in accordance with clause 100(1) of the Act.
[5] On January 30, 2024 a teleconference was held at 11:00 a.m. before a Residential Tenancy Officer (the “Officer”). The Landlord was represented by two representatives (the “Representatives”). The Tenant did not appear and did not have representation.
Issue to be Decided
i. Is the Landlord entitled to an additional rent increase above the annual guidelines?
Summary of the Evidence
[6] The Landlord submitted 39-pages of documents into evidence to support and assist the Applications and the Statement.
Landlord’s Evidence and Submissions
[7] The Representatives testified that expenses have continued to increase and with unexpected repairs and maintenance the Landlord is operating at a loss. The Representative testified that the Landlord is entitled to make a reasonable return on investment and the rent increase is only at 6%.
Tenant’s Evidence and Submissions
[8] The Tenant did not provide any evidence and did not provide any submissions for the Application.

Orders of the Director of Residential Tenancy

Adjustments to the Statement
[9] The Officer’s adjustments to the Statement are provided below and are reflected in Appendix “A” of this Order.
1. [Line 1 – Rental Income] $67,011.48
The additional rent increase would increase the rental income to $71,032.32.
2. [Line 12 – Management Fees] $4,393.29
Management fees are capped at 5.0% of the gross rental income pursuant to subsection 1(c) of the Regulations.
3. [Line 14 – Capital Expenditures] $29,200.08
The Landlord disclosed $29,200.08 in capital expenditures including heat pump installations. The annual write-off is $1,536.85. The Officer adjusts Line 14 to reflect the annual write-off amount.
4. [Value of the investment in the property] $527,950.08
The value of the investment in the property is $527,950.08 which represents the purchase price and capital expenditures since 2019.
Analysis
[10] The Application is made in accordance with section 75 of the Act and is pursuant to subsection 50(1) of the Act. When deliberating on the Application, the Officer must consider the factors outlined in clauses 50(3) and (4) of the Act and section 4 of the Residential Tenancy Regulations (the “Regulations”). The prescribed law is as follows:
Factors (3) The Director shall consider the following factors, as applicable, in deciding whether to approve an application for a rent increase under subsection (1):
(a) the rent history for the affected rental unit in the three years preceding the date of the application;
(b) a change in operating expenses and capital expenditures in the three years preceding the date of the application that the Director considers relevant and reasonable;
(c) the expectation of the landlord to have a reasonable return on the landlord’s capital investment;
(d) the expectation of the tenant that rent increases will remain within the annual guideline.
Other factors (4) The Director may also consider (a) any other factor considered relevant by the Director; and (b) any other factor prescribed in the regulations.

Orders of the Director of Residential Tenancy

Request for additional increase
4. For the purposes of clause 50(4)(b) of the Act, the Director may also consider that the purchase of a residential property should not require an increase of rent within the first year in order to achieve a reasonable return on the landlord’s capital investment. (EC269/23)
[11] The Application requires the Landlord to prove, on a balance of probabilities, that they are entitled to an additional rent increase above the annual allowable guidelines. This means that the Landlord must provide the decision-maker with sufficiently clear, convincing and cogent evidence to establish their request.
The Factors
[12] Regarding clause 50(3)(a), the Landlord provided the rents for the past three years.
[13] Regarding clause 50(3)(b), the Landlord provided documents into evidence to assist in establishing a change in the operating expenses over the past three years.
[14] Regarding clause 50(3)(c), the Statement’s income and expenses disclose that the Landlord currently yields a 0.6% return on investment. After the adjustments to the Statement (found in Appendix “A”), and the inclusion of the annual allowable and the additional rent increase, the return on investment would yield a 1.3% return.
[15] Regarding clause 50(3)(d), the evidence establishes that the last rent increases happened in 2022 and no additional rent increased occurred.
[16] The Residential Property was not purchased in the past 12 months. The Residential Property does not fit into the Regulations additional factor for consideration.
[17] The Officer concludes that the Landlord is entitled to an additional rent increase. The Officer comes to this conclusion after considering all the factors together. The Landlord has established that its operating costs have changed over the past three years (disclosed in the Statement). Specifically, the Officer references an increase in electricity, property tax and capital expenditures. Further, the Landlord has established that an additional increase would provide what is considered below a reasonable return on investment. The factors weigh in favour of the Landlord’s additional rent increase. Therefore, the Applications are allowed.
[18] The Landlord is permitted to increase the rents by the annual allowable set by the Director in the amount of 3% and the Landlord is permitted to increase the rent by an additional 3% on the effective dates set below. A total rent increase of 6% is allowed.
Conclusion
[19] The Applications are allowed.
[20] TAKE NOTE: This decision contains sensitive information of the Landlord and that the parties are required to preserve its confidentiality pursuant to subsection 75(3) of the Act.

Orders of the Director of Residential Tenancy

IT IS THEREFORE ORDERED THAT
A. The maximum allowable rent for the Rental Units are as follows:
Unit # New Rent (6%) Effective Date 1 $1,052.40 March 1, 2024 2 $1,052.40 March 1, 2024 3 $1,052.40 March 1, 2024 4 $920.72 March 1, 2024 5 $920.72 March 1, 2024 6 $920.72 March 1, 2024
DATED at Charlottetown, Prince Edward Island, this 23rd day of February, 2024.
(sgd.) Cody Burke Cody Burke Residential Tenancy Officer

Orders of the Director of Residential Tenancy

APPENDIX “A” Revised Statement of Income & Expenses (Form 10) Period "A" Proposal Allowed Rental Income Income (Line 1) $67,011.48 $71,032.32 $71,032.32 Arrears (Line 2) $0.00 $0.00 $0.00 Net Income (Line 3) $67,011.48 $71,032.32 $71,032.32 Expenses 1st Mortgage (Line 4) $18,650.49 $18,650.49 $18,650.49 2nd Mortgage (Line 5) $0.00 $0.00 $0.00 Fuel (Line 6) $9,835.74 $9,835.74 $9,835.74 Water & Sewer (Line 7) $1,344.00 $1,344.00 $1,344.00 Electricity (Line 8) $7,274.36 $7,274.36 $7,274.36 Insurance (Line 9) $3,526.00 $3,526.00 $3,526.00 Property Tax (Provincial) (Line 10) $12,275.76 $12,275.76 $12,275.76 Property Tax (Municipal) (Line 11) $0.00 $0.00 $0.00 Management Fee (Line 12) $3,350.55 $3,551.60 $3,551.60 Maintenance Fee (Line 13) $5,936.48 $5,936.48 $5,936.48 Capital Expenditures (Line 14) $1,536.85 $1,536.85 $1,536.85 Other (Line 15) $0.00 $0.00 $0.00 Total Expenses $63,730.23 $63,931.28 $63,931.28 Annual Net Profit $3,281.25 $7,101.04 $7,101.04 Value of Investment $527,950.08 $527,950.08 $527,950.08 Net Profit $3,281.25 $7,101.04 $7,101.04 Return on Capital Investment 0.6% 1.3% 1.3%

Orders of the Director of Residential Tenancy

NOTICE
Right to Appeal
This Order can be appealed to the Island Regulatory and Appeals Commission (the “Commission”) by serving a Notice of Appeal with the Commission and every party to this Order within 20 days of this Order.
If a document is sent electronically after 5:00 p.m., it is considered received the next day that is not a holiday. If a document is sent by mail, it is considered served on the third day after mailing.
Filing with the Court
If no appeal has been made within the noted timelines, this Order can be filed with the Supreme Court of Prince Edward Island and enforced as if it were an order of the Court.